The Note Making Waves Today: Goldman Adds Apple To 'Conviction Buy' List

• The share price of Apple Inc. (NASDAQ: AAPL) have appreciated 3 percent year-to-date, although the shares have been volatile all through the year.
• Goldman Sachs’ Simona Jankowski has maintained a Buy rating on the company, with a price target of $163.
• While adding the stock to Goldman Sachs’ Conviction Buy List, Jankowski mentioned that Apple was currently trading at a 30 percent discount to the S&P 500.

Analyst Simona Jankowski elaborated that the market viewed Apple as a “hardware” stock, “a transactional model with limited recurring revenues and with visibility that extends only to the next product cycle.”

However, Jankowski expects the focus to shift through 2016 from unit growth to monetization of the installed base and recurring revenues.

Related Link: iPhone 6 Upgrade Cycle Can Still Boost Apple, Says Canaccord

According to the Goldman Sachs report, “Apple’s model has already tilted that way with its new iPhone 6s installment plans, and we see the upcoming TV service as a powerful next step.”

Given that iPhone has an estimated installed base of 500 million loyal users, there appears to be a meaningful multi-year opportunity for the company to increase monetization via “(1) increased attach of services such as TV, Music, and Pay, and (2) increased attach of additional hardware such as Mac, iPad and Watch,” the report added.

Goldman also said the $100 billion pay-TV industry is ripe for disruption, a trend that was accelerated this past summer.

"The trend toward cord cutting and over-the-top media consumption is reinforced as millennials enter their household transformation years," the report said, "and we expect it to accelerate as more over-the-top TV services become available."